Business in Singapore
Overall picture -
Singapore has been
consistently ranked favourably as one of the best
places to do business in the world, and this comes
as no surprise. In the latest Doing Business Project
2009 undertaken by the World Bank Group, Singapore
came out tops in several categories.
The categories that Singapore was ranked first
included:
The ease of doing business - A high ranking
on the ease of doing business index means that the
regulatory environment is conducive to the operation
of a business. Also, the Singapore economy is based
on free enterprise, with no restrictions on foreign
ownership of business.
Employing workers - Employing workers
measures the flexibility of labour laws among
various countries over the world. It examines the
difficulty of hiring a new worker, rigidity in terms
of working hours and problems faced while dismissing
a worker.
Trading across borders - This ease of trading
across borders criteria includes documentation, time
and cost to export and import. Singapore is also
ranked first for having the most open economy for
international trade and investment by the World
Economic Forum.
Taxation - Singapore is business friendly and
an ideal country for company formation because of
the ease with which taxes can be filed and paid, and
also its low corporate tax rates relative to many
developed economies in the world. From Year of
Assessment 2010 onwards, the corporate tax rate of
Singapore is to be 17%, just 0.5% higher than that
of Hong Kong – Singapore’s closest competitor in the
Asia region.
However, the effective tax rate is significantly
lower than most of the countries, if not all the
countries, in the region. With a further reduction
in the 1% from 18% to 17% in corporate tax rate, it
will enhance Singapore's appeal to attract
investment dollars.
In addition, the Singapore Government has been
actively trying to encourage the growth of a
knowledge-based economy and have in place a myriad
of tax incentives – thereby lowering the effective
tax rates of companies. Some of the tax incentives
schemes handed out by the Economic Development Board
of Singapore (EDB) include:
Pioneer Industries - The EDB may grant
pioneer incentive to an approved industry which is
not being carried on in Singapore on a scale
adequate to the economic needs of Singapore, and for
which there are favourable prospects for
development. The tax relief period of a pioneer
enterprise shall commence on its production day and
shall continue for such period, not exceeding 15
years.
Pioneer Service Companies - Similar to the
Pioneer Industries scheme, it is granted to services
which fall under the list of ‘qualifying
activities’. These include any engineering or
technical services such as laboratory, consultancy
and research and development activities,
computer-based information and other computer
related services, the development or production of
any industrial design and such other services or
activities as may be prescribed.
Development & Expansion Incentive - A tax
relief period of up to 10 years as the Minister may
determine not exceeding 5 years for each period may
be granted upon approval to the manufacturing or
increased manufacturing of any product from any
industry that would be of economic benefit to
Singapore.
Enhanced Tax Deduction for Research & Development
(R&D) expenses - Where a taxpayer directly
carries out qualifying R&D activities in Singapore,
he can claim a further deduction of 50% of the
amount of qualifying R&D expenses incurred. This is
in addition to the 100% deduction he can claim for
such expenditure.
Treaties and Agreements - Currently,
Singapore has signed 18 free trade agreements (FTAs)
with many of the world leading economies including
the United States of America, Japan, Korea, and
China. There are also 5 on-going FTA negotiations,
with countries like India and Mexico. In the words
of International Enterprise (IE) Singapore, these
FTAs act as “superhighways that connect Singapore to
major economies and new markets”. The FTAs have
lowered the cost of doing business by reducing or
eliminating tariffs, easing investment rules, and
enhancing intellectual property regulations.
On the tax front, Singapore has also concluded many
Double Taxation Agreements (DTAs) with other
jurisdictions. This provides certainty to businesses
regarding when and how tax is to be imposed, thereby
reducing compliance costs. DTAs also allow companies
to claim for relief of taxes paid overseas. To date,
Singapore has signed and ratified comprehensive DTAs
with 60 countries, 7 limited treaties and 4 more
which are signed but not ratified.
In essence, with efficient planning and structuring,
Singapore is a great jurisdiction for company
incorporation, as it results in a higher net profit
after tax. The efficient economy, good
infrastructure, skilled workforce and sound economic
policies in place has certainly boosted Singapore’s
reputation an ideal jurisdiction to do business in.
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